"IT'S HERE - BOWSER REPORT - COMPANY OF THE MONTH"
"COMPANY OF THE MONTH"
Right off the bat, let's get the negatives out of the way...
This is not a high-tech stock. It is in a highly-competitive
commodities type of business.
And, the current stock price accurately reflects the negative
aspect of the situation. What the price doesn't reflect is the
firms potential.
Krantor is a distributor for approx. 2,000 brand-name promotional
grocery, general merchandise and health and beauty aid products.
In promotional grocery wholesaling, KRAN purchases goods during
periods when manufacturers engage in special sales. There are
purchased at 15% to 25% below regular wholesale prices. They are
then sold to retailers immediately or warehoused for sale at a
later date.
Proctor & Gambles Tide is sometimes offered as a promotional
item, for example.
In the beginning, KRAN concentrated on the promotional business.
However, in late 1994, management decided to diversify. From being
a warehouse distributor of promotional merchandise, it would
wholesale directly to retail stores.
By operating as a wholesaler, KRAN knows its wholesale business
can be more easily controled than the promotional products
operation, since favorable pricing and product available is not
dependent on promotional programs, which manufacturers announce
on an ad hoc basis. (In 1995, 23% of gross revenues came from
wholesale activities-a percentage that will greatly increase in
1996.
To implement it's wholesale activities, Island Wholesale Grocers
Inc. (IWG) was formed in 1994. In May'95, wholesale operations
were futher expanded by the creation of Affiliated Island
Grocers Inc. d/b/a Island Frozen & Dairy(IFD). The formation of
IFD is the most significant and exciting development in KRAN's
comparative short history.
IFD enabled Krantor to expand it's wholesale activities into
Kosher & speciality foods. IFD is now the largest independent
distributor of Kosher and specialty goods in the U.S. It's
anticipated that this category will constitute more than 45%
of the firms total consolidated 1996 revenues.
There has been a steady rise in the demand for Kosher food, attributable to several factors: (1) an increase perception
among non-jews, especially Muslims and vegetarians,that Kosher
products are of a higher quality and are safer.(2) Increased
observance of Kosher standards among the Jewish population.
(3)Better distribution of Kosher products, because of an increase
in the number of national and local supermarkets carrying them.
Although IFD wholesales over 1,500 different type of Kosher
foods, it's best seller is poultry. The company has become the
largest wholesaler of Empire Kosher Poultry Inc. frozen chicken
products. It is expected that Island Wholesale Grocery sales of
Kosher poultry will account for approx. 20% of Empires total
national sales.
KRAN also expects to increase its sales efforts within the food
service institution segment of the Kosher food business....
catering facilities, schools, hospitals,nursing homes and hotels
are familiar with the one-stop Kosher food concept that IFD
has to offer.
Considering that it was only formed in 1989, management has
accomplished much. In fact, it is aiming to do around $65 million
this year. And, the only deterrent to growth is lack of capital.
However, their line of credit is the largest it has ever been,
which reflects the confidence that lending institutions have in
the company. (In Nov.94',$3.7 million was netted to KRAN in a
secondary offering.
Management is young. All of the officers and directors are under
50. President Henry J. Platek Jr. is 48 and paid a comparatively
modest $108,000 annually, according to the most recent info.
Mair Faibish, 35, the chief financial officer, is the biggest
stockholder-owning almost 1.7 million shares.
The warrants (KRANW) are attractive. With an exercise price of
$3.35, they don't expire until 11/13/99. Recently they were 25 cents
each. They aren't callable until the common hits $5.53 a share.
This years qtr. will still have some onetime charges due to the
new units. After that, the earnings picture should be very good.
(IN 1995, if it hadn't been for one-time charges, net income
would have been $1,172,883.
Some 80% of KRAN's revenue comes from the northeastern part of
the U.S.... There are 16 market makers.
NOTE: THE ABOVE IS FROM THE BOWSER REPORT, MAY ISSUE...
|
